Rating agency Icra on Monday lowered credit rating of close to Rs 36,000 crore worth of long-term debt instrument of steel producer JSW Steel to ‘AA-‘ from ‘AA’. While it affirmed the grading of short-term instruments of about Rs 21,400 crore, Icra lowered its outlook on the long-term rating of the steel producer to Negative from Stable citing a sharp decline in profitability and cash accruals of the company.
Icra noted that JSW Steel’s contribution levels and operating profits per metric tonne have reduced significantly in the current year, following a drop in its sales realisations on the back of declining international steel prices and rise in level of steel imports in India.
Although the rating agency seems upbeat on the outlook for the profitability of JSW Steel in the near term due to imposition of minimum import price (MIP) and expected higher volumes, it observes that the coverage indicators would still be lower compared to Icra’s previous estimates.
The impact of further deterioration in the financial profiles of JSW’s overseas subsidiaries JSW Steel (USA) Inc, Santa Fe Mining (Chile) and Periama Holding LLC, on the consolidated financial position of the company was also considered as one of the concerns.